According to Recital 9 of Delegated Regulation 2017/2358, manufacturers should select insurance distributors that have the necessary knowledge, expertise and competence to understand the features of an insurance product and the identified target market. They should also monitor their distribution channels on a regular basis to ensure that the insurance product is mainly distributed to the target market in conformity with their product oversight and governance arrangements. If it is identified that products are being distributed outside the target market, manufacturers must take appropriate action.

In cases where there have been instances of the product being distributed outside of the target market, the manufacturer will need to assess whether there are any adverse consequences for customers outside of the target market who were provided with the product. If adverse consequences are identified, manufacturers must, in accordance with Article 7(3) of Delegated Regulation 2017/2358, take appropriate action to mitigate the situation and prevent further occurrences. Whereas Recital 9 of the IDD confirms that the IDD does not prohibit the distribution of insurance products to customer outside of the target market, EIOPA assumes that distributing insurance products to customers outside of the target market is an exceptional event if the product oversight and governance arrangements are appropriately applied by insurance undertakings and intermediaries. (Recital 9 of Delegated Regulation 2017/2358 states with regard to sales outside of the target market: “That should however not prevent insurance distributors from distributing insurance products to customers who do not belong to that target market, provided that the individual assessment at the point of sale justifies the conclusion that thos products correspond to the demands and needs of those customers and, where applicable, that the insurance-based investment products are suitable or appropriate for the customer.”).